No parachute? Five situations when insurance could save your business

One of the most tricky decisions when starting a business is determining what type of business insurance policies your company needs. This purchase is often one of the overlooked steps in the early stages of a company’s life. A good business insurance plan will protect two things: the customer and your investment in your business. With the right coverage, business insurance protects your business against losses and helps ensure that you can continue running your business if the unexpected (and the expensive) happens.

Below are five scenarios that can take your business by surprise, and how business insurance can help you keep your doors open.

1. A fire (or flood, or earthquake) destroys much of your workplace. Let’s say that your one of your employees decides to use the office microwave, and it malfunctions. A small fire starts and the building must be evacuated. Moreover, your offices must be closed for the next several days for repairs. Fires can devastate a business because of the loss of both facilities and time that could have been spent running the business.

Most commercial property insurance policies cover losses due to fire or some other sort of disaster. Normally, your property insurance policy will have a list of perils that are covered and not covered. You can also purchase a policy specific to fire insurance, for example, if you feel your business is more susceptible to this type of damage more than other sorts of disasters.

It’s important to note that property insurance or fire insurance alone will not cover the productivity lost due to the office being closed temporarily. To recoup those costs, you need business interruption insurance, which will protect your business against the loss of revenue as well as any potential relocation costs. This is a separate policy that is crucial to have — because while repairing damages can break the bank — the revenue lost from shutting down operations, even for a short time, could be a huge hit to your bottom line.

2. An employee is injured on site while working on a project during company hours. Your company is working on a project at a construction site. There are many dangerous tools and hazards present. One of your employees trips and falls, injuring their back. You as the employer are liable for their medical treatment.

Workers’ compensation is a form of insurance that provides wage replacement and medical benefits for employees who are injured during employment, and having this type of insurance is generally a legal requirement (check with your state government for more specific guidelines). Regardless of the legal requirement, workers’ comp can be considered one of the most crucial types of insurance policies to have, because of the lawsuits that may ensue if your business does not provide adequate assistance to an injured employee. By providing compensation (through the insurance) the tradeoff is that your employee will relinquish the right to sue you for the tort of negligence.

Another negative consequence of a potential lawsuit is that it may attract negative attention to the company, make it more difficult to hire new workers in the future. Most importantly, it can be very expensive to defend a lawsuit. However, the good news is that it’s all avoidable by having the proper worker’s compensation insurance.

3. Company property is damaged or stolen. When you arrive at your office in the morning, you are shocked to find doors and windows broken, and all of your computers have been stolen. What’s more terrifying is that your customer information was stored on the stolen hardware, and your customer’s private information has been compromised.

Like in the fire scenario, commercial property insurance protects your physical assets not only during disaster, but in the event that your property is stolen. Some types of commercial property coverages that would be good to have in the event of a burglary are employees’ personal property coverage and off-premises property coverage. The former protects your employees’ personal items while the latter protects any property you might own off-site. It may also be prudent to purchase a form of crime coverage. Robbery and safe burglary coverage is a limited form of coverage that does not include money or securities. Theft, disappearance, and destruction coverage insures money, securities, and other property against losses.

Now for the second issue — the data breach. Cyber-security policies are a new form of insurance to ensure against your data (and the data of your customers) from being stolen or made public. This kind of policy can cover the cost of managing this crisis, from bringing on a special PR team, disclosing the breach of data to your customers, and even providing credit monitoring service to your customers to ease their concerns about the data breach (and about the trustworthiness of your company).

4. Your employee needs medical procedures or physical therapy. Whether you know it or not, your employees have a variety of different medical conditions. Let’s say that your secretary has carpal tunnel syndrome. If it goes untreated, she will be unable to perform her job, and will have to take a leave of absence in order to correct the problem, and you’ll have to hire a temporary replacement.

If your secretary has health insurance, she’s more likely to see a doctor and will get preventative care before she needs to get surgery, versus waiting until she needs urgent care, which will make her unable to work. It’s also worth noting that private companies with 50 or more employees in 20 or more workweeks must comply with the Family and Medical Leave Act. So if your secretary needs surgery, you need to provide unpaid leave for up to 12 workweeks if she is unable to work after her surgery.

Although illnesses are often not preventable, having health insurance for your employees can reduce your turnover and keeping your employees healthy contributes to a more productive workforce. Also, offering health insurance helps in the hiring process because job-seekers will be drawn to the attractive health benefits.

5. Consumers are harmed from defects in your product. Your company manufactures and produces toy airplanes that are sold nationwide. After launching a new toy model, you receive complaints from your customers that the toy airplanes are defective and cause minor injuries and damage.

Liability insurance covers the manufacturer’s or seller’s liability for losses or injuries to a buyer or user of your product due to defect or malfunction. It can even include cases of defective design or failure to adequately warn consumers of the hazards. You may face a variety of claims that can very costly to a business. Liability insurance is often covered in a general business insurance policy, but you should make sure that you have sufficient coverage in case a claim is filed against you. The premiums on your policy will be based on the danger level of the product you are selling or producing, the number of sales, and the role of the insured.

With these scenarios in mind, it’s easy to see the important of having comprehensive business insurance policies. By talking to a business lawyer or an insurance agent, you can ensure that your company is well-protected.